Coursera, Udacity And The Future of Credentials

The term "science project" means different things to different people. To a science or engineering professional, it may connote a grand ambition like the Apollo Program that landed men on the moon. To the general public, it probably means grade school projects on which children (and parents) spend countless hours. To investors, science projects are companies trying to solve important problems, but perhaps not seeing any payoff in a meaningful timeframe.

For me, “science project” takes me back to 10th grade biology. Our assignment was to report on a real world example of biological science. ‎I chose to visit the Toronto sewage treatment plant and wrote my report on the workings of the plant, with a focus on the little understood difference between scum and sludge: Sludge settles on the bottom and needs to be scraped up; scum floats to the top and needs to be skimmed off.

There are two critical science projects underway in higher education. First and most important is figuring out how to use technology to significantly improve developmental/remedial education. This is related to about a thousand things currently happening in K-12 education. The answer will undoubtedly involve adaptive learning and gamification, and perhaps immersive learning as well. This science project is at the top of everybody’s list.

The second science project, and the one I spend a lot of time thinking about, is how to use technology to develop and deliver shorter, less expensive, 100% digital (and therefore accessible) postsecondary programs that lead to credentials that employers will recognize and value. The answer – if there is one – will be critical to the future of colleges and universities. One might go as far to say that whoever solves this science project merits a badge.

Two high-profile companies are pursuing a badge-based future: Coursera and Udacity. Both began their lives as providers of Massive Open Online Courses (MOOCs). While some figured out quickly that there was no business model to support credential-less online learning, it took the companies a bit longer. Udacity pivoted first in 2013, announcing “Nanodegrees” developed in partnership with leading technology companies (“built by industry”). The thinking being that Google’s involvement in the Android Developer Nanodegree improves the curriculum; the Google brand doesn’t hurt either. Udacity has done the same with iOS (Apple), Tech Entrepreneur (Google) and its other programs (by a committee of leading technology lights).

For its part, Coursera is betting on content and brands from top universities. Coursera launched its “Specializations” in 2014 and now offers 75 different programs, the vast majority from a single university. Specializations consist of a series of 3-10 courses followed by a capstone project. Students who complete a Specialization earn a certificate that includes the university’s name, the student’s name, the name of the Specialization, and this description “a non-credit series authorized by [UNIVERSITY NAME] through Coursera.” Then, at the bottom, a large Coursera seal, around which is written “Verified Certificate.”

Are they making progress? Based on public reports, it appears Udacity has more momentum. A New York Times profile of Udacity on September 17 revealed that Udacity has 10,000 students enrolled in Nanodegrees – a number growing by 30% every month. (This was confusing, because an Economist profile of Udacity founder Sebastian Thrun two weeks earlier said 60,000 students were enrolled in Nanodegrees. Presumably 50,000 didn’t drop out, but the lower number seems plausible.) And if 10,000 students are paying $200 per month, that’s annual revenue of over $20M – perhaps enough for profitability.

For its part, Coursera hasn’t announced Specialization enrollment numbers, although Coursera CEO Rick Levin – former President of Yale brought onboard last year, in part due to his unparalleled connections in China and throughout Asia – has said that the Specializations/certificate model is “financially sturdy enough that it should pave the way for Coursera to become cash-flow positive in the foreseeable future.”

Again, the project Coursera and Udacity are trying to solve is to develop shorter, cheaper and more accessible credentials – badges – that employers will recognize and value as an alternative to the existing, expensive and constantly derided degree-industrial complex. To this end, both companies are trying hard to link their content to employers. Udacity’s Nanodegrees carry with them the names of the world’s most famous technology companies. Coursera’s Specializations carry the names of the world’s most famous universities. And in the case of a few Coursera Specializations, both famous universities and companies. Specializations from Duke and UCSD include the following: “Google has contributed real-world projects and the involvement of its engineers as guest lecturers to these courses. A small, select group of top learners who complete the Specialization will be offered practice interviews with Google recruiters. Invitation to a practice interview does not guarantee an actual interview or employment.” Then in August, Coursera announced its Global Skills Initiative, pairing universities with employers: Essentials of Corporate Financial Analysis and Decision Making matches University of Melbourne with Bank of New York Mellon; the Internet of Things is a product of UCSD and Qualcomm; Big Data is with UCSD and Splunk.

Google is the company that’s most invested in completing this science project. In addition to partnering with both Udacity and Coursera, Google’s Senior VP of People Operations has gone on record as saying that grades in degree programs are “worthless as a criteria for hiring.” As a result, Google also requires candidates to take assessments, which are much more predictive of success on the job.

But it’s not enough that Bank of New York, Qualcomm, Splunk and even Google are interested in hiring students who complete these programs. The resulting credentials need to be recognized by millions of other employers. And typical employers aren’t willing to do the work to figure out if a Nanodegree or Specialization is comparably effective preparation (or even a comparably effective filter) to a traditional degree.

Udacity recognizes this and as part of its ballyhooed launch into India has announced a partnership with the Indian conglomerate Tata; Tata will provide 1,000 scholarships to students in the Android Nanodegree program and graduates will be invited to meet Tata representatives at a job fair. But even the capital raised by Udacity and Coursera isn’t enough to complete the science project one employer at a time, particularly not when the student-employer connection occurs on-the-ground. (This is one reason why University Ventures is an investor in ProSky, a company that makes a direct connection between students and employers through project-based online courses that employers use to screen candidates.)

If I had to guess this project’s outcome, I’d say that both Udacity and Coursera are on the money with their focus on emerging markets; the degree-industrial complex is less ensconced in these countries. In addition, Udacity is right in its laser-focus on the IT sector; IT employers are far more receptive of new credentials than employers in other sectors. As evidence of this, look no further than the multiplicity of badges (Cisco, Microsoft) that have been accepted in the sector for decades, as well as at the explosive growth of onground coding bootcamps, most of which aren’t doing much to gain recognition for the resulting badge or credential.

Udacity and Coursera could probably accelerate market acceptance by connecting students and employers digitally – whether during their Nanodegrees and Specializations or after – and presumably on the basis of competencies gained (students) vs. competencies needed (employers). With additional connectivity to employers, Udacity and perhaps Coursera could emerge as the online counterparts to General Assembly and Galvanize – dominating the business of IT postsecondary education, both onground and online.

How it goes beyond IT is anyone’s guess. With luck, the result of this science project will see both Udacity and Coursera floating to the top, but in a manner very different from what I saw at the sewage plant.